REVENUE MEMORANDUM CIRCULAR NO.

39-2012 issued on August 6, 2012

requires the withholding of taxes on backwages, allowances and benefits received by
virtue of a labor dispute award through garnishments of debts due to the employers and
other credits to which the employer is entitled including bank deposits, financial interests,
royalties or commissions.
Persons having control of the payment of wages or salaries are authorized to deduct
and withhold upon such wages or salaries the Withholding Tax due thereon. In this case,
the garnishees are the persons owning debts due to the employer or in possession or
control of credits to which the employer are entitled. Accordingly, they are in control of the
payment of backwages, allowances and benefits and they are authorized to deduct and
withhold the income tax due from the backwages, allowances and benefits to be paid to
employees and are respectively liable for such deductions.
To ensure the collection of the appropriate Withholding Taxes on wages, garnishees
of a judgment award in a labor dispute are constituted as withholding agents with the duty
of deducting the corresponding Withholding Tax on wages due thereon in an amount
equivalent to 5% of the portion of the judgment award representing the taxable backwages,
allowances and benefits.